The Center for Policy Dialogue (CPD) has raised concerns over the budget allocation for the power and energy sectors of the 2025-26 fiscal year. CPD believes that the interim government has fallen behind in its political aspirations of three zeros.
CPD believes Bangladesh may fall further behind in its energy transition without urgent reforms. In this regard, the CPD has urged the adoption of a five-year plan including urgent reforms.
Speakers shared these information at a CPD discussion titled 'Power and Energy Sector in the National Budget for Fiscal Year 2025-26: Reflections on Energy Transition Priorities' at Dhaka on Thursday.
Energy Adviser Muhammad Fouzul Kabir Khan joined the discussion virtually as the chief guest.
Besides, CAB Professor Dr M Shamsul Alam, Energy Expert Monowar Mostafa, BKMEA Vice President Md Akhtar Hossain Apurba, and BGMEA Director Faisal Samad, and others were present as speakers.
A study led by Dr Khondaker Golam Moazzem and his team has revealed that the interim government is still at a "2.50-zero" quota in implementing these three goals - zero poverty, zero unemployment, and zero carbon emissions.
The renewable energy sector has not received importance in the budget for the fiscal year 2025-26, but rather, the dependence on fossil fuels has been further increased. Even though VAT exemption has been given on LNG imports, no incentive for renewable energy.
In addition, no steps have been reflected in the budget to overcome the financial crisis of state-owned enterprises related to the sector.
In addition, only seven projects have included renewable energy this year, which is slightly more than last year, but the allocation for project implementation is very low. Although a special fund of Tk700 crore has been mentioned in the budget but the CPD believes that it is not enough.
The study also highlights several challenges facing the power and energy sector in the future, such as the fact that BPDB is still facing losses despite subsidies and tariff revisions.
CPD research says that BPDB's losses in the 2024-25 fiscal year amounted to Tk8,803 crore, and the losses could increase to Tk9,430 crore in the next fiscal year.
On the other hand, the profits of BPC and RPGCL often come at the expense of consumers. The increase in fuel prices under the automatic pricing system has led to the profit of state-owned Bangladesh Petroleum Corporation (BPC) standing at Tk2,500 crore in the outgoing fiscal year 2024-25.
The CPD said that due to recent geopolitical unrest, including Israel-Iran tensions in the Middle East, the price of oil has increased in the international market. This could reduce BPC's profit to Tk615 crore in the upcoming fiscal year 2025-26.
According to CPD, not only BPC, but also two companies under Petrobangla, Bapex and RPGCL, have made a profit in the 2024-25 fiscal year. According to the organization, BAPEX earned a profit of Tk137 crore and RPGCL earned a profit of Tk41 crore due to the increase in gas prices in the industrial sector.
According to the CPD forecast, BAPEX's profit could increase to Tk258 crore and RPGCL's profit to Tk49 crore in the next fiscal year 2025-26. Such growth has come in the face of VAT waiver on LNG imports and the possibility of a further increase in gas prices.
On the other hand, subsidies in the power sector now account for 41% of the national total, and LNG import subsidies have been increased to Tk9,000 crore in FY 2025-2026. But even then, the government is moving towards LNG imports without paying attention to domestic gas exploration.
Even the lack of transparency in the market-based energy pricing model was introduced in March 2024. Which is vulnerable to tax and exchange rate shocks. The government is relying on expensive short-term debt to repay debt, which is raising sustainability concerns. In addition, the emphasis on coal extraction and LNG imports in the budget indicates a departure from the zero-emissions commitment, according to CPD.
Recommendations
To address these challenges, the CPD recommends a series of strategic policy shifts, starting with the termination of tax breaks for fossil fuel power projects and the introduction of carbon taxes and tariffs on imports of fossil fuel plants.
It also calls for the removal of all subsidies for fossil fuels and LNG, and a redirection of focus toward domestic gas exploration, funded through gas development resources. Inefficient power plants should be phased out, and existing Independent Power Producer (IPP) contracts that are deemed unnecessary must be reconsidered.
The recommendations include increasing the share of renewable energy in the Annual Development Programme (ADP), reducing import duties and VAT on renewable technologies, and creating a renewable energy subsidy fund. To support the integration of renewables, investments in smart grid infrastructure are essential.
The CPD also advocates for securing low-interest financing from multilateral development banks (MDBs) instead of relying on short-term commercial loans. Finally, a comprehensive review of the national energy policy is advised, ensuring it aligns with the country’s renewable energy target for 2040.
The CPD research also noted that the upcoming fiscal year will be a critical test of the government's resolve to deliver on its climate and energy change commitments.
CPD Research Director Khandaker Golam Moazzem said: "This budget will be implemented by the current interim government and the next elected government. Despite the huge investment made in the power and energy sectors during the previous government, energy availability may have increased. But at the same time, we have seen that quality power and energy, or ensuring energy conversion, has not been done."
He added: "Rather, we have seen widespread looting during these times. We have seen waste of money, major problems, such as a lack of good governance, during the previous government's tenure. Our hope is that the interim government will identify the weaknesses in good governance in the power and energy sectors. They will play an effective role in energy conversion, they will give more balance in the policy framework, and the issue of long-term sustainable energy."
Energy expert Monowar Mostafa said: "We thought that this budget of the interim government would at least have something about zero carbon. But like other years' budgets, the issue of zero carbon in this budget is implicit. On the other hand, where the world is working on energy transition, in Bangladesh, the budget has not given importance to energy transition, especially renewable energy."
BKMEA Vice President Md Akhtar Hossain Apurba said, "We have been repeatedly asking for uninterrupted electricity and gas supply. Despite the price increase, uninterrupted electricity and gas supply have not been ensured. Currently, industrial factories in Gazipur, Savar, and Narayanganj are under threat. We demand that the government ensure uninterrupted electricity and gas supply, especially for industrial factories."
BGMEA Director Faisal Samad said: "The budget allocated for the financial year 2025-26 is highly disappointing. We had expectations from the interim government that the budget would be announced through dialogue with the opinions of people from different sectors, but that was not done. If this continues, then no matter how much we protest, it will not be possible to change the country."
Consumers Association of Bangladesh (CAB) Energy Adviser and Professor Dr M Shamsul Alam said: "Every government institution is adopting the character of a fascist. Even though the fascist government has fallen, they have not fallen. If the same thing happens with this interim government, like the previous government, then what was the need for August 5? I don't know what the energy adviser is doing or whether he understands anything at all. But I will say this much: we should take to the streets to establish our own rights instead of running after the energy adviser."